Higher gift tax exemption to be discontinued

We sort of knew, but now it’s official: the government will not extend the scheme under which a higher amount – up to €100,000 – could be gifted towards owner-occupied properties. The scheme will end on 31 December 2014.

2015 will see the return of old-style tax-free rules governing property-based gifting. Exemptions will not be granted for anyone who’s already received a one-off higher exemption.Tjarko Denekamp Estate Planning Specialist

What did the additional exemption bring?

It’s hard to estimate how much money has been gifted. Banks report higher repayments on mortgage loans, but can’t always tell whether the source is a gift or a customer’s own savings. The Dutch tax authorities will receive the gift tax returns in which taxpayers claim the exemption, and these will need to be in by 1 March 2015 at the latest. It’ll be a while before the authorities have the complete picture.

That said, on 1 July 2014 the Dutch tax authorities had clocked up over 50,000 of such gift tax returns, way more than the predicted 20,000 – clearly a highly popular arrangement. The impact on the Dutch government budget is likely to be muted: although it stands to receive less in inheritance tax, it will also need to pay out less in mortgage interest relief. Finance Minister Dijsselbloem claims that the enhanced exemption kick-started the recovery of the residential property market in the Netherlands. And that’s exactly what it was meant to do.

Complexity

Taxpayers looking to take advantage of the gift tax exemption, face a rather complicated scheme, governed by a range of terms and conditions and covering various spending goals – and it gets really tricky if it’s applied to a shared property (read more here).

Any gifts received in 2014 and earmarked for a renovation or a house-build may also be spent after 31 December 2014, in keeping with the normal rules. No transition arrangements or extensions apply. If the gift is earmarked to be paid towards a mortgage loan, its recipient should factor in time for the bank to process the repayment.

Residential property-focused gift tax exemption in 2015

2015 will see the return of old-style tax-free rules governing property-based gifting. Under the scheme, children or their partners aged between 18 and 40 may receive a one-time gift of just over €52,000, which they are required to spend on their owner-occupied property. Exemptions will not be granted for anyone who’s already received a one-off higher exemption.

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